Senior Liberals are angry at one of their own MPs,
Alex Hawke
, and believe his public criticism of the Coalition’s paid parental leave scheme has scuttled any last chance of convincing leader
Tony Abbott
to shelve or amend the controversial policy.

As the business community stepped up its criticism of the plan, Mr Abbott reaffirmed his iron-clad commitment to the scheme, which appears to have blown out in cost since the last election from $3.3 billion a year to a possible $4.3 billion.

Exasperated senior Liberals, who had been still hoping to talk Mr Abbott down, threw up their hands in defeat.

“It’s locked it in more than ever,’’ lamented one member of the frontbench. To be funded by a 1.5 percentage point increase in company tax for the nation’s most profitable 3200 companies, the policy was rounded on by Mr Hawke as an unnecessary and unjustified burden on business and in contravention of basic Liberal Party economic philosophy.

Mr Hawke, whose view is shared by his fellow economic dries and the Nationals, was backed publicly on Monday by Western Australian MPs Mal Washer and Dennis Jensen.

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Many more supported Mr Hawke privately but would not comment publicly in order to preserve discipline and their post-election career prospects.

“Tony’s made it clear he’s not changing his mind. All this will do is harden him up,’’ said one MP opposed to the policy. “I don’t think it’s helped his [Mr Hawke’s] cause.’’

Scheme too generous: Greens

The Greens said the scheme was too generous and economically irresponsible and promised to try to amend it in the Senate if Mr Abbott is elected.

The Australian Financial Review revealed renewed concerns over the tax three weeks ago after the Coalition, citing budget constraints, quietly dropped plans to fully offset the tax increase with a 1.5-point company tax reduction for all companies, big and small.

Instead, the Coalition will offer a “modest’’ reduction in company tax, the size and timing of which are yet to be determined. All the while, Mr Abbott has vowed to press ahead with the full 1.5-point increase in his first term but probably towards the end of that term.

This means business faces a net increase in company tax to fund the scheme.

Mr Hawke, who is understood to have received a stern phone call from Mr Abbott on Monday morning, would not resile from his criticism, outlined in an article for the Institute of Public Affairs.

He directly disputed Mr Abbott’s claim the scheme was a “signature policy’’ and would be an important legacy of an incoming Coalition government.

“This policy is not a signature policy of the Coalition. Economically this is ill suited,’’ said Mr Hawke, who holds the seat of Mitchell in Sydney’s north-west.

Abbott hits back

“I tend to find the feedback from business groups, from women in the community and from colleagues, is that now would be a very good time to revisit this policy with a view to scraping it before the next election so we can go to the election without this albatross around the neck of the party.’’

Mr Abbott, who has warned repeatedly against any external displays of disunity in the run-up to the September 14 election, shot back, saying Mr Hawke was a backbencher who “has written an article saying that he doesn’t like the scheme’’.

“Fair enough. But this has been our policy now for more than three years.

“It’s a very important sign that we get it when it comes to the modern family. The modern family invariably needs more than just one income.

“So look, I think this is a sign that we are prepared to move with the times and I’m totally committed to it and so is the party," Mr Abbott said.

The policy is regarded by its many critics as too generous, politically unwarranted and funded by a tax that will hurt business and discourage investment.

It proposes to provide a primary carer six months’ leave paid at their full wage, capped at a salary of $150,000. This means a maximum payment over six months of $75,000.

The policy, which Mr Abbott took to the 2010 election, was designed to broaden his support with female voters. After the election, he was urged by shadow cabinet colleagues to drop it.

Labor had won the election and in January 2011 it introduced the nation’s first universal paid parental leave scheme providing 18 weeks leave paid at the minimum wage, taking the political imperative from of the issue.

Fear of socialist overtones

The opposition comes from both ends of the spectrum in the Coalition.

Economic dries like Mr Hawke and much of the shadow cabinet, including shadow treasurer
Joe Hockey
and deputy leader
Julie Bishop
, had long argued internally that the Liberal Party was not in the practice of increasing taxes, especially on business.

There is a widespread view that the policy has socialist overtones, a view shared by business and economists.

At the other end of the spectrum is the National Party which opposed the policy from the outset. Most of the National’s traditional constituents are stay-at-home mothers and they believe such a generous paid parental leave scheme discriminates against them.

When Mr Hockey recently argued in shadow cabinet for the Coalition to support Labor trying to trim the cost of the baby bonus, the Nationals helped roll him, arguing reducing the bonus from $5000 to $3000 for second and subsequent children would further increase the disparity between their constituents and working women.

Mr Hockey, who gave a speech to the IPA on Monday warning the age of entitlement was over, was forced to publicly defend the policy afterwards.

However, he was equivocal about the timing and implementation of the policy.

Hockey said to be angry

Sources told the Financial Review that Mr Hockey, who did not return calls, was among those angry with Mr Hawke.

Greens Senator
Sarah Hanson-Young
said if the Coalition won the election, the Greens would seek to amend the scheme in the Senate to provide six months at minimum wage with superannuation contributions paid.

“Treasury costings have shown that the Greens’ plan will cost less than one fifth of the Coalition’s, at $740 million per year compared to the Opposition’s $4.3 billion scheme,’’ she said.

Assistant Treasurer David Bradbury called it a “$12 billion monster tax".

He noted Mr Abbott claimed it would boost productivity but the Productivity Commission, which designed Labor’s scheme, did not recommend the Coalition’s approach.